Reconciling Differences - Receipt vs Fully Prepaid PO

This topic covers a number of scenarios when your Purchase Order has been flagged as 'Fully Prepaid' in PO40, yet when you receive the goods in PO60, there are discrepancies that require further action to reconcile the differences.

1. You receive more inventory than what was ordered in the 'Without PO' folder in PO60:
   • On your 'Fully Prepaid' PO, you order a product with a quantity of 5 at $11/per item. This product totals $55.00 on your PO.

   • You create a 'payable' invoice for your PO in AP30. In this simplified example, your payment is for $55.00. Because this is a payment for a 'Fully Prepaid' PO, you must change the GL Distribution in AP30/GL Dist to debit the Prepaid Inventory GL account.

   • When you run AP31, the following GL entries are created:

     Accounts Payable                   55.00 (cr)
     Prepaid Inventory          55.00 (dr)
     

   • Then you pay the vendor for this amount by running AP40/42/43 or AP 50/51. The register shows the GL entries for the payment that was processed:

     Bank                               55.00 (cr)	
     Accounts Payable           55.00 (dr)
     

   • When you receive the goods, you have an extra 3 items (at $11.00 each) that are received "without a PO" in PO60. When you run PO64 a record is passed to the Unmatched Receipts Accrual file for the added receipt line; the following GL entries are created:

     Inventory              88.00 (dr)
     Prepaid Inventory                       55.00 (cr)
     Receipts Accrual                        33.00 (cr)
     

   • Because the value of the receipt is increased, you must process another payment to the vendor for the difference which, in this case, is $33.00. In AP30, you create another payable invoice for the vendor and match it to the receipt. When you run AP31, the following GL entries are created:

     Accounts Payable                   33.00 (cr)
     Receipts Accrual           33.00 (dr)
     

   • You must still produce a payment to the vendor for this amount by running AP40/42/43 or AP50/51. The register shows the GL entries for the payment that was processed:

     Bank                               33.00 (cr)	
     Accounts Payable           33.00 (dr)
     

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2. You increase the receipt amount of a Product either by increasing the price or by changing the discount on the 'Against PO' folder in PO60:
   • On your 'Fully Prepaid' PO, you order a product with a quantity of 3 at $11/per item. This product totals $33.00 on your PO.

   • You create a 'payable' invoice for your PO in AP30. In this simplified example, your payment is for $33.00. Because this is a payment for a 'Fully Prepaid' PO, you must change your GL Distribution in AP30/GL Dist to debit the Prepaid Inventory GL account.

   • When you run AP31, the following GL entries are created:

     Accounts Payable                   33.00 (cr)
     Prepaid Inventory          33.00 (dr)
     

   • Then you pay the vendor for this amount by running AP40/42/43 or AP50/51. The register shows the GL entries for the payment that was processed:

     Bank                               33.00 (cr)	
     Accounts Payable           33.00 (dr)
     

   • When you receive the goods, this product has a revised price of $15.00 per item. In PO60, you receive the product with this new price. When you run PO64, the following GL entries are created:

     Inventory                  45.00 (dr)
     Prepaid Inventory                  45.00 (cr)
     

   • Because the value of the receipt is increased, you must process another payment to the vendor for the difference, which in this case is $12.00. In AP30, you create another payable invoice for the vendor, and on the GL Distribution folder you change the GL account for the debit to Prepaid Inventory. When you run AP31, the following GL entries are created:

     Accounts Payable                   12.00 (cr)
     Prepaid Inventory          12.00 (dr)
     

   • You must still produce a payment to the vendor for this amount by running AP40/42/43 or AP50/51. The register shows the GL entries for the payment that was processed:

     Bank                               12.00 (cr)	
     Accounts Payable           12.00 (dr)
     

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3. You receive more in inventory than what was ordered by increasing the Quantity Received in the 'Against PO' folder in PO60:
   • On your 'Fully Prepaid' PO, you order a product with a quantity of 5 at $11/item, totaling $55.00 on the PO.

   • You create a payable invoice for $55.00 in AP30 and distribute the Debit of $55.00 to Prepaid Inventory. When you run AP31, the following GL entries are created:

     Accounts Payable                   55.00 (cr)
     Prepaid Inventory          55.00 (dr)
     

   • Then you pay the vendor for this amount by running AP40/42/43 or AP50/51. The register shows the GL entries for the payment that was processed:

     Bank                               55.00 (cr)	
     Accounts Payable           55.00 (dr)
     

   • When you receive the goods, you receive 6 units at $11.00. You recall the PO line and increase the Received Quantity, thereby increasing the value of the receipt. When you run PO64, the following GL entries are created:

     Inventory                66.00 (dr)
     Prepaid Inventory                  66.00 (cr)
     

   • Because the value of the receipt has increased, you must process another payment to the vendor for the difference which in this case is $11.00. In AP30, you create another Payable invoice for the vendor and send the offsetting Debit to prepaid inventory.When you run AP31, the following GL entries are created:

     Accounts Payable                   11.00 (cr)
     Prepaid Inventory          11.00 (dr)
     

   • You then produce a payment to the vendor for this amount by running AP40/42/43 or AP50/51. The register shows the GL entries for the payment that was processed:

     Bank                               11.00 (cr)	
     Accounts Payable           11.00 (dr)
     

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4. You receive less than expected and cancel the backordered quantity:
   • On your 'Fully Prepaid' PO, you order a product with a quantity of 5 at $11.00/item, totalling $55.00 on the PO.

   • You create a payable invoice for $55.00 in AP30 and distribute the Debit of $55.00 to Prepaid Inventory. When you run AP31, the following GL entries are created:

     Accounts Payable                   55.00 (cr)
     Prepaid Inventory          55.00 (dr)
     

   • Then you pay the vendor for this amount by running AP40/42/43 or AP50/51. The register shows the GL entries for the payment that was processed:

     Bank                               55.00 (cr)	
     Accounts Payable           55.00 (dr)
     

   • When you receive the goods, you receive 4 units at $11.00. You recall the PO line and cancel 1 unit by decreasing the Received Quantity. This decreases the value of the receipt. When you run PO64, the following GL entries are created:

     Inventory                  44.00 (dr)
     Prepaid Inventory                    44.00 (cr)
     

   • The amount of the prepayment ($55.00) is greater than what was received; now your vendor owes you. In AP30, post a Credit Note for the $11.00 overpayment and send the offsetting credit to the Prepaid Inventory account. When you run AP31, the following GL entries are created:

     Accounts Payable           11.00 (dr)
     Prepaid Inventory                    11.00 (cr)
     

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5. There are landing/other charges on the final vendor invoice that were not prepaid and are still owing to the vendor:
   • Enter a payable invoice in AP30 for the value of the charges and distribute the offsetting Debit to the appropriate expense account.